CRA agent’s job includes checking that the information you have provided and filed on your return is accurate. Put differently, this means trying to catch taxpayers who make mistakes or are tax cheats.
Triggers to CRA increasing their level of scrutiny include:
- Late filing
- Increasing unpaid balances
- Major changes in income and expenses between years
- Inconsistent information between your return and records they have from third parties.
CRA will deploy various tactics including sending you forms to fill out in order to build trust with you so that you tell them everything they need to know. It truly can wind up being a case of them playing “good cop, bad cop.”
Here is a typical scenario that we see with CRA enforcement agents:
- Taxpayer owes a debt
- CRA agent calls taxpayer and indicates that they are prepared to accept a payment arrangement – often this will be over 3-6 months. The CRA agent will advise the taxpayer that they simply need to complete a financial disclosure statement to bind the arrangement. The financial disclosure statement will require you to disclose your current income, income source, expenses, assets, liabilities, as well any bank accounts that the taxpayer has. CRA agent is very friendly in this phase and the taxpayer likely thinks that he/she “got lucky” and landed up with a nice, reasonable CRA collector.
- In good faith, the taxpayer completes the financial disclosure statement and begins making payments.
- As part of the payment arrangement CRA will ask for post-dated cheques or direct payment through the bank.
- Fast forward 3-6 months and the taxpayer will receive a call from the CRA agent, perhaps even a different agent.
- This time the CRA agent is less friendly, less co-operative and wants to be paid in full or demands a monthly payment that is impossible to make.
- When the taxpayer indicates that they cannot make payment to the CRA agent in the amount demanded, CRA proceeds to freeze the taxpayer’s bank account, garnishee wages and/or place a lien on the taxpayer’s home.
How were they able to take enforcement action so easily? Because the taxpayer served all of their personal information up to the agent on a silver platter when the initial arrangement was made.
CRA is not your friend and cannot be treated as such. No matter how nice or how willing they seem to be as far as negotiating with you, their job is to collect your money and they do a very good job of this. If you owe CRA money and you know you cannot pay in full, right away, you have a problem and should consider seeking professional guidance before you have any conversations with CRA and do anything to expose yourself.
You simply cannot afford to not take dangerous CRA forms like the financial disclosure statement seriously. Handing information out the wrong way can trigger extreme financial hardship, hardship that may prevent you from even paying for your basic necessities of life. With professional experience there are proper processes that force CRA to deal with you fairly in respect of the back taxes and minimize penalties and interest.
For more information about dangerous CRA forms or if you have a problem with CRA and require guidance please visit www.taxsolutionscanada.com or call 1-888-868-1400.